"Call it corporatism, call it socialism. Whatever we call it, the Dodd bill is not a free market system. Instead, it adopts a system that over history has consigned tens of millions of people to lives of poverty throughout the world."—Bill Wilson, President of ALG.
Says Expanded Takeover Provisions Threaten Free Enterprise System
April 22nd, 2010, Fairfax, VA—Americans for Limited Government President Bill Wilson today condemned what he called the "unlimited bailout fund" and "greatly expanded federal takeover provisions contained in the Dodd bill that threatens every business in America with a government takeover of its assets, operations, and ownership."
ALG today published a comprehensive backgrounder, "Down a Rabbit Hole," on the imminent danger this legislation represents. "Under the Dodd bill, the government could seize any institution it wants," Wilson declared, urging Senate Republicans to filibuster the measure.
"This legislation has got to be one of the most egregious violations of property rights in American history. It will give to government the means to consolidate the economy, pick winners and losers, centralize credit, and eliminate entrepreneurship — all by faceless bureaucrats who nobody will ever see," said Wilson.
Wilson pointed to provisions in the bill creating a $50 billion revolving "orderly liquidation fund," which he said is "actually an unlimited bailout-takeover fund that will most certainly be abused by a government hell-bent on taking over every aspect of the economy and redistributing wealth to favored political classes."
"The fund would be used to save politically-favored institutions deemed 'too big to fail', or to seize financial institutions and other entities deemed by the Federal Reserve to be 'substantially engaged in activities' that are financial in nature," Wilson explained.
"That is very muddy language, and it will be up to the relevant agencies to determine what 'substantially engaged' means," Wilson added. "It's a rabbit hole."
"If a new government power can be abused, it will be abused," Wilson predicted, pointing to the government seizure of GM and Chrysler under the Troubled Asset Relief Program. "Even though those were auto companies that posed no systemic risk to the financial system, and even though there were private sector alternatives to the government takeover, they were considered to be economically important enough to apply to TARP."
Wilson continued, "The same thing will happen under the Dodd bill to other companies, except the fund will be unlimited. And like TARP, the actions taken under the fund will not be subject to Congressional approval."
Under the Dodd bill, a firm can be put into receivership by a recommendation of two-thirds of the Federal Reserve Board of Governors and the FDIC Board of Directors, and determination by the Treasury Secretary. "This transfers the determination of what constitutes risk from markets to a Politburo that operates with impunity on its own and without any accountability with the power to seize whatever it deems to be 'too risky,'" Wilson explained.
Wilson said the seized firms "will most likely be sold to the very financial institutions that are taxing the people to finance the fund in the first place," meaning the fund "could be used by government to knock out competitors to politically-favored institutions."
As the fund is drained, FDIC can charge more assessments to keep the fund at its $50 billion limit. "That's what makes the fund actually unlimited and permanent, because as it's used up, the FDIC can just charge the banks more assessments without any Congressional approval."
"Call it corporatism, call it socialism. Whatever we call it, the Dodd bill is not a free market system. Instead, it adopts a system that over history has consigned tens of millions of people to lives of poverty throughout the world. By its passage, we're abandoning the only system that has ever guaranteed prosperity and the opportunity for individuals to make themselves wealthy through the protection of private property," Wilson concluded.
"'Down a Rabbit Hole:' The Threat Posed by the Dodd Bill to the Private Sector," April 22nd, 2010, Americans for Limited Government.